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Venezuela: the development of an oil-dependent country after the crisis

Venezuela: the development of an oil-dependent country after the crisis . Ilona Švihlíková . Oil . Discovered in 20´s – Venezuela the biggest world oil exporter Thanks to oil – economic and social structure differs from other Latin American countries 50-50 rule The founder of OPEC

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Venezuela: the development of an oil-dependent country after the crisis

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  1. Venezuela: the development of an oil-dependent country after the crisis Ilona Švihlíková

  2. Oil • Discovered in 20´s – Venezuela the biggest world oil exporter • Thanks to oil – economic and social structure differs from other Latin American countries • 50-50 rule • The founder of OPEC • Hawk in OPEC

  3. Top ten oil reserves (BP statistical review)

  4. Impacts • Importance of state and oil company PDVSA • Geopolitical risks • Position in OPEC • Dutch disease (exchange rate, inflation, impacts on trade flows) • Necessity to diversify the economy

  5. The start of Bolivarian Revolution • Hugo Chávez Frías (1998 – 56%) • Financing of social programmes: OIL • 1) reviving OPEC – oil diplomacy (not using dollars!) • 2) getting control of PDVSA (a state within a state) • Organized a coup d´etat against Chávez • Chávez returned within 48 hours • Gained control of PDVSA

  6. Ten years of Chávez´ reforms (Socialism of the 21st century) • Oil as a geopolitical tool: ALBA, Petrosur • State involvement in the economy • Social reforms (missions) • Workers self-management • Land reforms (food sovereignty) • Direct democracy (community councils) • Internationalism (integration) against US imperialism

  7. Venezuela: Real GDP development

  8. Achievements and failures • Growth of manufacturing sector (98,1%) • Declines in poverty and inequality • Social missions: Barrio adentro, Robinson, Ribas missions – increase in HDI and Latinobarometro (positive evaluation) • Budget surplus, decline in foreign debt (and helping Argentina) • High inflation (30%) – low absorption and thus overvaluation of exchange rate

  9. And then came the crisis • Channel to Venezuela:not financial sector, but oil price - dramatic decline (the burst of the oil bubble) • OPEC – severe cuts in quotas • GDP (2009) – 3,3% • Economic adjustment package: VAT increase, cuts • Exchange rate devaluation, high inflation, electricity black-outs (drought)

  10. High oil price volatility

  11. Impacts of the crisis • The recession was longer and deeper than in other Latin American countries

  12. Economic data (Eurostat 2011)

  13. Current top oil producers (JODI – September 2011)

  14. Where does Venezuelan oil go?

  15. Despite diversification efforts… • 80-90% of export revenues, 50% of government income, 30% of GDP = OIL • PDVSA, third biggest oil company (Saudi Aramco, Exxon Mobile) • 10% of PDVSA´s investment budget goes for social programmes • Intensive cooperation with China • Petrocaribe initiative • Disputes in OPEC

  16. International dimension of Bolivarian revolution • Opposition towards US imperialism – Venezuela as a model for rest of Latin America? • ALBA • UNASUR • Bank of South • Petrosur, Petrocaribe… • But: „the enemy of my enemy is my friend“ approach in foreign policy

  17. Grassroot dimension • Support by the liberation theology • Decentralisation of economic and political power • Communal councils (30 000 until now) • Cooperatives (100 000) , workers participation (Alcasa factory) • Community media network • Enormous political activity + indigenous population rights.

  18. Criticism • From the right: authoritarian style (top – bottom), strong influence of the military. • From the left: populism, emerging personality cult (With Chávez everything, without Chávez nothing), bureaucracy, Venezuela still a capitalist country (private sector 70%) • High crime, patronage and clientelism, housing and electricity shortages remain serious problems • Much of the process depends on Chávez: his illness?

  19. Thank you for your attention

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